Elinor Ostrom may arguable be considered the mother of field work in development economics. She has worked closely investigating water associations in Los Angeles, police departments in Indiana, and irrigation systems in Nepal. In each of these cases her work has explored how between the atomized individual and the heavy-hand of government there is a range of voluntary, collective associations that over time can evolve efficient and equitable rules for the use of common resources… Ostrom’s work is about understanding how the laws of common resource governance evolve and how we may better conserve resources by making legislation that does not conflict with law. –Alex Tabarrok, George Mason University

Williamson’s paper , The Economics of Governance (working version) published in the May 2005 AER is an excellent recent summary of his views in the area. Williamson’s work is notable for inspiring a large body of empirical and theoretical work in modern industrial organization and having influence in law, political science, and management. His work has been widely cited, and by some counts he was the most widely cited economist in the world. –Alex Tabarrok, George Mason University

The way to think about this prize is that it’s an award for institutional economics, or maybe more specifically New Institutional Economics… Oliver Williamson’s work underlies a tremendous amount of modern economic thinking; I know it because of the attempts to model multinational corporations, almost all of which rely to some degree on his ideas. I wasn’t familiar with Ostrom’s work, but even a quick scan shows why she shared the prize: if the goal is to understand the creation of economic institutions, it’s crucial to be aware that there is more variety in institutions, a wider range of strategies that work, than simply the binary divide between individuals and firms. The prize is also, of course, a happy reminder that most of the profession is not caught up in the macro wars! –Paul Krugman, Princeton University and 2008 Economics Nobel laureate

Because they’re behavioral economists, it makes sense. Behavioral economists have been short-sighted by other economists and the Nobel committee. The financial crisis has show that markets fail and these economists have addressed and evaluated market failures and collective actions. –Jack Strauss, St. Louis University

It’s a message as far as I’m concerned that the field of economics is trying to bring itself back from being purely quantitative to being a multi-disciplinary field. –Kathleen Stephansen, Aladdin Capital Holdings

It’s important for economists to have an input into areas besides just inflation and GDP growth. It’s important to apply economic analysis in a number of areas where important insights can be gained for policy purposes. –Lynn Reaser, Point Loma Nazarene University

The political implications of this year’s Nobel prize are clear. In the aftermath of the financial crisis, people are experiencing a revulsion against markets. However, turning the economy over to the government is not palatable either, since no one really believes the politicians and bureaucrats will do a better job. The same two-sided distrust of markets and government is shaping the healthcare reform and climate change debates. From that perspective, the Ostrom/Williamson prize may come at exactly the right time, since it shows that there are credible alternatives to the dueling poles of market and government. –Michael Mandel, BusinessWeek

What’s interesting is that in the ensuing 15 years, it seems to me that economists have talked less and less about Williamson’s research, at least in the circles in which I run. I suspect most assistant professors of economics have barely heard of him. Yet I suspect the older generation of economists will applaud this choice. The reaction of the economics community to Elinor Ostrom’s prize will likely be quite different. The reason? If you had done a poll of academic economists yesterday and asked who Elinor Ostrom was, or what she worked on, I doubt that more than one in five economists could have given you an answer. I personally would have failed the test. I had to look her up on Wikipedia, and even after reading the entry, I have no recollection of ever seeing or hearing her name mentioned by an economist. She is a political scientist, both by training and her career — one of the most decorated political scientists around. –Steven D. Levitt, University of Chicago

Oliver Williamson wrote a bunch of interesting stuff about the value of the firm–Ronald Coase stuff–and transaction costs. For instance, he highlights the ‘own’ rate of interest for owning commodities because it allows one to avoid transaction costs delivering the underlying commodity. This has relevance to the contango and normal backwardization of futures contracts. He reads a lot like Frank Knight to me, with a strong respect for markets, and not highly mathematical. Yet, like Knight, it’s hard to develop models based on his work, which makes him a surprising result. An idea that generates a model, no matter how abstract, seems the economic ideal. I think Williamson’s work is very good for undergraduates, so hopefully this will get him read more. I honestly have never heard of Elinor Ostrom before. –Eric Falkenstein, Falkenstein Financial

Ostrom studied cases in which private individuals established rules that worked. Meanwhile, government regulations (including assignment of property rights) often failed, particularly when individuals did not buy in to the purpose of the regulation. With the advent of the Internet, the issue of private provision of public goods has emerged once again. Think of Wikipedia, or perhaps Twitter, or the various task forces that monitor security issues and define software standards. Williamson is known for looking at the issue of the boundaries of the firm. This is another issue that interested Coase. I think of Williamson as looking at the issue in terms of central planning vs. markets. –Arnold Kling, EconLog

It seems more or less beyond dispute that the Nobel committee was trying to send a political message by giving Barack Obama the Peace Prize. Now it looks like the Nobel brass has decided to send a similar, if slightly more subtle, message in awarding the economics prize to Elinor Ostrom of Indiana and Oliver Williamson of Berkeley. (It’s worth mentioning that the two prizes are awarded by different committees, as many readers probably know…) Both spent their careers thinking about non-market interactions and Ostrom is actually a political scientist (not to mention her suspiciously Scandinavian-sounding name). –Noam Scheiber, The New Republic

Ostrom & Williamson study the way decisions are made outside of markets, which is the focus of many other economists. This award is a victory, in small part, for the Behaviorists, whose studies of our flawed wetware include such normal human foibles as irrationality, poor decision making, biases, non profit maximizing behavior. –Barry Ritholtz, Fusion IQ

I applaud this year’s selection of Elinor Ostrom and Oliver Williamson. Williamson’s 1985 book The Economic Institutions of Capitalism remains a classic that repays careful study, even in 2009. And Ostrom’s work on how people often solve public-goods problems voluntarily is too often overlooked — until today, that is! –Don Boudreaux, Café Hayek

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